In a monopolistically competitive industry, firms set price
a. equal to marginal cost since each firm is a price taker.
b. below marginal cost since each firm is a price taker.
c. above marginal cost since each firm is a price setter.
d. always a fraction of marginal cost since each firm is a price setter.
c
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A nation with an official settlements balance of -$100 billion is likely to experience a:
A) balance of payments surplus and accumulate $100 billion in international reserves B) balance of payments deficit and accumulate $100 billion in international reserves C) balance of payments surplus and a decline of $100 billion in international reserves D) balance of payments deficit and a decline of $100 billion in international reserves
If a 2 percent increase in the price of product X causes the demand for product Y to increase by 6 percent, then:
A. X and Y are complements. B. X and Y are substitutes. C. X and Y are independent goods. D. the demand for X is elastic.
If a buyer in an economic transaction has more information than the seller, the buyer benefits at the expense of the seller. This phenomenon is due to
A) moral hazard. B) adverse selection. C) economically irrational behavior. D) gains from trade.
If all firms in a competitive industry experience an increase in marginal costs, then which of the following is most likely to occur in the short run?
a. Firms will enter the market. b. Existing firms will expand production. c. Firms will shutdown. d. Firms will exit the market.